by Andrew Bryce
Amid the environmental hype it has become difficult for industrialists and other owners of land to get to grips with the real implications for their business of the continuing encroachment of environmental regulations. The Environmental Protection Act 1990 and the progress of European environmental legislation all add to the complex legal picture. The proposals for contaminated land registers have only heightened concern.
While we have so far managed to avoid the excesses of the American system in relation to the regulation of contaminated land, there are a range of current issues arising out of the Environmental Protection Act (“EPA”) and other legislation which will have important implications for vendors and purchasers of land and their professional advisers, as well as for those financing such transactions.
In this article I examine briefly the provisions of the Act in relation to contaminated land, waste and integrated pollution control.
Clean-up liability
In recent years the “clean-up” issue has been given considerable publicity principally as a result of the draconian and somewhat wasteful regime which exists in the United States. At the end of January 1990 the House of Commons select committee on the environment produced Contaminated Land. This report is a useful overview of the current difficulties in the UK of identifying and regulating such sites, and made several useful suggestions for improving current legislation and site identification, highlighting the inconsistency of the UK approach both technically and legally. Some of these have now been taken up by the Government, which has produced its own formal response to the committee’s report (Cm 1161). The response discussed the topic generally and highlighted the two important areas where the Environmental Protection Act legislates, namely in the cleaning-up of closed waste sites and the creation of registers of contaminated land.
Section 61 of the EPA places upon the waste regulation authority a duty to inspect its area to detect whether any land is in such a condition by reason of “the relevant matters” affecting the land that it may cause pollution of the environment or harm to human health. These are widely defined in the Act. The “relevant matters” to be addressed are: “the concentration or accumulation in and emission or discharge from the land of noxious gases or noxious liquids caused by deposits of controlled waste in the land”. The authority may enter and inspect any land where controlled waste has been deposited at any time, or where it has reason to believe that there may be concentrations or accumulations of such gases or liquid. Once such land has been identified then the authority has a duty to take such steps as appear to them to be reasonable to avoid such pollution or harm.
Cost recovery
The cost of such works can be recovered from “the person who is for the time being the owner of the land, except such of the cost as that person shows was incurred unreasonably”. It should be borne in mind that the clean-up cost could be considerable, and the owner to whom it is charged may have been unaware of the problem when the land was purchased. One can envisage lengthy disputes as to whether steps taken were “reasonable”, and waste regulation authorities are therefore likely to be conservative in steps taken and in money expended to avoid possible shortfalls in cost. They must, however, be careful, because if damage to adjoining owners results and they have failed to take reasonable steps they may be liable for breach of statutory duty. In the case of insolvent or absent or unidentifiable owners the cost will be borne by the public purse.
The powers of entry and recovery also extend to land adjacent to that on which waste was originally dumped and which is now in a condition that may cause pollution or harm to human health. Cost recovery in such a case would appear to be from the owner of the land affected, not the owner of the land where the waste was originally deposited. Owners of land adjoining waste facilities or potentially polluting industries should be cautious.
While the clean-up costs theoretically enhance the value of the land, the implications for an impecunious owner (notwithstanding the ability to charge the cost to the public purse in cases of hardship) and for a mortgagee wishing to protect its security will be significant. No definition of “owner” is given (although the Planning Acts, Public Health Acts and the Water Act do define the term) and if the term does not extend to tenants then landlords could be in for some unpleasant surprises. On the other hand tenants who may have given a broad covenant to indemnify a landlord against any impositions enforced by statutory authorities may find themselves saddled with significant liabilities. The original disposer has no liability under section 61 unless he is still the owner or the site licence is current, where the waste regulation authority will normally have rights under that licence against him.
Waste regulation authorities will have to have regard to guidance from the Secretary of State in relation to the operation of this section and this may give guidance to the definition of owner.
Registers of contaminated land
The Government amendments to the Bill introduced section 143 of the EPA during the committee stage in the House of Lords in order to impose a duty on district councils in England and Wales to compile and maintain registers of contaminated land.
The DOE issued a consultation paper in May, the principal features of which are:
(a) The list to be compiled is of sites which have been or are presently being used for uses which amount to a “contaminative use” defined as “any use of land which may cause it to be contaminated by noxious substances”. The registers will not deal with actual contamination.
(b) The paper contains a proposed list of contaminative uses. This is very wide and, apart from the obvious industries such as waste disposal, metal production and chemical production, includes certain manufacturing, textile, energy, timber and food industries. The Government has requested comments.
(c) The registers will not be exhaustive and will rely on availability of historical information.
(d) The paper sets out a list of information to go on the register and the proposed format.
(e) The paper gives brief guidance on the methodology for identification and the profile of uses as well as containing a helpful list of information sources for establishing past uses.
(f) The timetable for compilation is that local authorities should compile the information from April 1992, with the registers operational from April 1993. Some authorities are already putting together the information.
Practical problems
The proposals give rise to considerable practical problems.
Once land has been put on the register it will remain there notwithstanding any clean-up operation. Details of such an operation will be put on the register, but the Government says: “It should, however, make no assessment of the condition of the site; this should always be reserved for professional judgment at the time when it is needed and in the light of the latest knowledge.” Unless there is immediate danger from the contamination, landowners will be inclined to clean-up only when they are required to do so on a sale or financing when the operation can be done to satisfy a purchaser or bank.
Land going on the register will be blighted, but the Government’s approach on this is clear. They considered it to be desirable that such land is identified so that problems can be addressed. The market value of some land will undoubtedly be affected and this could make some banks very nervous about some of their existing security. It seems likely that many landowners will be put to considerable expense to show that their land is no longer contaminated when they wish to sell even if the historical use was in the last century.
For purchasers or lenders the registers may be a useful starting point, but as they are not exhaustive they will not remove the need for appropriate site and historical investigations by lawyers, valuers, surveyors and environmental consultants. It will be a matter of commercial risk as to whether purchasers and financiers wish to require full investigations. The implications of not doing so are considerable.
The full practical implications of the registers will have to await the final form of the proposed regulations and the proposed circular, but there is no doubt that the issue of contaminated land will now form a part of all substantial land transactions. An urgent historical study of existing land may be available.
Statutory nuisances
The Environmental Protection Bill contains provisions in Part III for tidying up the legislative provisions under which local authorities can serve abatement notices in respect of nuisances occurring on land. Under previous legislation the local authority had no preventative powers other than in relation to noise. The new provisions provide that a local authority, if satisfied that a statutory nuisance exists or is likely to occur or recur, may serve an abatement notice requiring the abatement of the nuisance or prohibiting or restricting its occurrence or recurrence. It is worth noting that these provisions relate, among other things, to “any accumulation or deposit which is prejudicial to health or a nuisance” and therefore can apply to land with a potential for contamination. There are default powers for the local authority to recover expenses reasonably incurred in abating or preventing a recurrence of a statutory nuisance. These can be recovered from “the person by whose act or default the nuisance was caused and, if that person is the owner of the premises, from any person who is for the time being the owner thereof”.
Other issues
Other points arising from the Act in relation to contamination include:
- general duties under integrated pollution control for operators of certain major processes to render harmless any substances released into any environmental medium. There are wide powers for the court and, in some cases, the Chief Inspector of Her Majesty’s Inspectorate of Pollution to require clean-up of pollution which has arisen from breach of an IPC authorisation. It remains to be seen how widely these powers are used.
- a duty of care to be imposed on waste producers and holders to take all reasonable steps to prevent environmental pollution or harm to human health resulting from its disposal. It is worth pointing out that the duty of care will extend to building contractors who will have to be very careful about the destination of waste material taken from a site. Failure to take reasonable care will result in criminal liability: civil liability could also arise under the proposed EC directive referred to below.
It is also worth bearing in mind that the Water Act 1989 gave power to the National Rivers Authority under section 115 to take steps to remedy any pollution that has taken place to controlled waters (such as rivers) as well as to prevent any such pollution. The cost of works or operations in this connection can be recovered from any person who:
(a) caused or knowingly permitted the matter in question to be present at the place in which it was likely in the opinion of the authority to enter any controlled waters; or
(b) caused or knowingly permitted the matter in question to be present in any controlled waters.
This power should not be taken lightly and the NRA has shown itself to be very positive in its enforcement of pollution controls.
Civil liability
The environment committee recommended that statutory liability should be established for contamination of land. The Government’s view appears to be, however, that English common law should continue to apply and specific reference to Rylands v Fletcher was made. Although the courts have limited the application of this strict liability principle, it is probable that it would apply in cases of leachate and methane gas from a waste site which cause damage on an adjoining site.
The Government seems reluctant to take any step in this direction, probably as a result of current discussions in Brussels on the draft EC directive, Civil Liability for Damage Caused by Waste.
This draft directive has been the subject of much discussion and the Environment Subcommittee of the House of Lords European Communities committee has reported on its provisions. It places on waste producers strict liability for waste which they produce until such waste is committed to a licensed disposal installation or undertaking. They are responsible for damage to persons and property and for impairment of the environment. As liability is strict it is not necessary to show any fault by the producer and litigation is a little easier.
The definition of “the producer” under the current draft is very wide, and as well as a normal industrial producer of waste includes a person in actual control of the waste if they are unable to name the original producer. There will obviously be some argument as to what amounts to actual control. There is, however, a potential problem for owners and mortgagees in the case of damage caused by contaminated land where the identity of the original waste producer is not known. It seems to me unlikely to attach liability to lenders unless they are in possession or exercising direct control over the land, but this is unclear. In any event, this provision, as with the rest of the directive, may suffer from substantial amendments before adoption. An amended proposal has just been published by the commission and among the amendments is the right for common interest groups to take action for impairment of the environment. The producer also has to have in place insurance or other financial security to cover his liability. It also proposes that the commission should consider setting up a fund to deal with irrecoverable damage.
The directive is not intended to be retrospective, and a limitation period would exist, lasting 30 years from “the incident” giving rise to the damage. It is unclear whether this relates to the deposit of waste or the time at which the waste becomes a problem, but discussions with the commission have indicated that the intention is that it should apply only to future deposits of waste and not apply to past deposits where problems arise in the future. This could be an important distinction for owners of land with historical problems.
The recent proposal for a directive on the landfill of waste will also have implications for the future uses of former landfill sites.
Conclusion
The issues relating to contamination impinge directly on the value of the land or security. It should be borne in mind that the tightening of regulations generally has a cash-flow implication. The requirement to upgrade plant and machinery may have a fundamental effect on a company’s finances, and backers should carefully consider lending to process industries which may have to clean up their act.
It would be easy for property owners, mortgagees and their advisers to dismiss the contaminated land issues as problems affecting a minority of cases: the general attitude would be “we have never had a case in the past”. The difference in the future will be that not only will regulation be more stringent but that the awareness of all parties will be greater; and therefore problems which have remained unseen for many years will be discovered and become an issue.
Whether detailed site investigations take place on any particular site prior to acquisition or sale it will fall to the professionals — the lawyers, valuers and surveyors — to investigate the problem, and in so doing a major factor will be introduced into the negotiating balance.
